Elon Musk is acknowledged by U.S. President Donald Trump during Trump’s address to a joint session of Congress at the US Capitol in Washington, DC, on March 4, 2025.
Saul Loeb | Afp | Getty Images
Stocks are fluctuating. Inflation is likely to rise again, albeit possibly only temporarily, if President Trump proceeds with his expansive tariffs threats against global trading partners. Trump and his senior economic advisors indicate that he intends to follow through on this plan starting April 2, asserting that any short-term market correction or economic “detox” is a necessary consequence to reset the U.S. economy. Trump has also intensified his calls for the Federal Reserve to lower interest rates to mitigate the impact of tariffs, as more Americans grow increasingly concerned about their financial circumstances.
Moreover, there is at least one more avenue for the administration to ease public discontent.
As Elon Musk’s so-called Department of Government Efficiency (DOGE) continues its mission to streamline government operations, the concept that savings could be returned to taxpayers in the form of checks has emerged. Although this idea has surfaced in the news cycles intermittently, Trump has previously voiced his support for it. “I love it. A 20% dividend, so to speak, for the money we’re saving by targeting waste, fraud, abuse, and other issues,” Trump remarked to reporters at one occasion.
The precise amount of any potential DOGE dividend check is uncertain, but analysts have compared a 20 percent dividend to approximately $5,000 per taxpaying household (this figure represents 20 percent of the savings derived from the proposed cuts). Interestingly, even James Fishback, the CEO of an investment firm that originally suggested the dividend concept, admits he isn’t certain what the final amount would be.
“Now look, for those who want to critique this plan by stating that DOGE would never yield $2 trillion in total savings, we disagree, but let’s hypothetically assume they are right,” Fishback mentioned in an NBC News interview. “Let’s say it’s only $1 trillion. In that case, the check would shrink from $5,000 to $2,500. Now, if it’s just $500 billion… then the check would be $1,250. That still represents real money.”
While the prospect of a no-strings-attached check may be appealing, numerous economists caution against it.
“Injecting $5,000 per person into the economy sounds fantastic theoretically, but it’s akin to pouring gasoline on an already raging fire,” warns Aaron Cirksena, CEO of investment firm MDRN Capital.
The issuance of these checks could trigger a rise in inflation.
“If people choose to spend it, demand surges, leading to inflation. If they opt to save or invest it, the immediate impact diminishes, yet long-term consequences hinge on market reactions. The principal risk? Short-term relief might morph into persistent inflation challenges,” Cirksena elaborated.
Kevin Hassett, head of the National Economic Council, recently stated in a CNBC interview that the DOGE dividend checks present a “great deal of sense.” He contends that those asserting it would provoke inflation misunderstand economic principles.
“People claim it’s inflationary if we send these checks to consumers. However, consider that if the government spends a dollar, you get whatever multiplier effect that entails; conversely, if they don’t spend the money and return it to taxpayers, it essentially balances out. If some of it is saved, inflation could decrease. The notion that it’s inflationary is misguided. People should revisit their economics textbooks before making politically charged assertions,” he expressed.
Nevertheless, economists are concerned that the proposed payments lack sound fiscal grounding.
John W. Diamond, CEO of Tax Policy Advisers and an adjunct professor of economics at Rice University, recently noted in a Wall Street Journal Op-ed co-written with former Secretary of State James Baker that reforming entitlements linked to a healthy infusion of DOGE would be effective in managing the federal deficit — however, DOGE alone is insufficient. Thus, while Diamond supports the DOGE initiative (though he clearly articulates his reservations about its overall methodology), he believes that refunding money to taxpayers is illogical.
“I cannot endorse the DOGE dividend; it contradicts the principle of cutting spending to lessen the deficit only to subsequently return funds to taxpayers,” Diamond remarked. “I contend that 100 percent of the savings should contribute to deficit reduction. There’s no rationale for returning funds to current taxpayers when it merely defers the financial responsibility to future taxpayers,” he added.
Much hinges on how recipients choose to utilize any potential payouts, notes Alice Kassens, director of the Center for Economic Freedom and a professor of economics at Roanoke College. “The proposed structure suggests that dividends would be distributed solely to net income tax payers. The objective is to ensure it does not serve as a stimulus (like the stimulus checks during the pandemic, intended to sustain consumption) and ideally is saved by households inclined toward saving,” Kassens stated.
In such scenarios, a DOGE dividend could elevate the national savings rate, thereby contributing to future investment and economic expansion.
“The plan aims for the majority of the savings identified by DOGE to be directed towards reducing the national debt, reserving only a minor portion — 20 percent — for the dividend to taxpayers. While this approach would diminish the debt by less than if the entire amount was allocated to this purpose, it could potentially be counterbalanced in the long run through increased personal savings, investments, and economic growth,” she concluded.
Concerns About ‘Sugar Rush, Adrenaline Shot’ for the Economy
Yet many in the market and economists harbor skepticism.
Cirksena remarked that even if some fraction of a government payout to the public goes into savings, as occurred with parts of the Covid stimulus checks, it will primarily drive immediate demand, compelling people to spend it on goods and services. If supply cannot match this demand, prices will inevitably rise. Moreover, while infrastructure spending can also be inflationary, it is more evenly distributed over time and invested in productive economic initiatives, rendering it more sustainable.
“The manner in which the money circulates is crucial,” he asserted.
There exists a clear distinction between disbursing $5,000 to taxpayers and government investments in programs like the Inflation Reduction Act.
“Infrastructure expenditure is gradual — it’s allocated over time and contributes to wages, materials, and productivity-enhancing projects. It creates value,” Cirksena noted. In contrast, direct stimulus has a far more immediate impact on the economy, akin to a sugar rush — rapid spending, sudden demand spikes, and an elevated risk of inflation without fostering enduring economic growth. “One represents a short-term adrenaline boost, while the other signifies a long-term strength endeavor,” Cirksena added.
At the moment, the administration has not placed a DOGE dividend high on its public agenda. Aside from tariff policies as an economic focus, Trump’s recent address to Congress emphasized tax cuts and infrastructure investment. Should the administration be concerned about tariff policies causing short-term inflationary pressure on the economy, this would be understandable. Injecting $5,000 per person into the economy could easily exacerbate an already heated situation.
The administration is leaning towards fostering economic growth through investment and tax incentives instead of direct cash handouts, Cirksena pointed out, adding that Trump’s concentration on tariffs and domestic production suggests a strategy aimed at channeling resources toward industries rather than directly distributing them to consumers.
“Thus, it appears out of place,” Cirksena remarked.
Jonathan Ernest, an economics professor at Case Western Reserve University, states that now is not an opportune moment to launch stimulus measures, given that all indicators suggest a robust economy. While it may represent a viable political strategy, it could ultimately hinder the Fed’s efforts to address inflation and reduce interest rates, according to Ernest.
Issuing a stimulus check at this juncture, when inflation persists above the Fed’s target, could inflame demand, driving prices even higher, he warns, and it might lessen the chances of the Fed reaching its inflation objectives. “A stimulus at this point doesn’t quite align with our current monetary policy, which has facilitated a soft landing thus far,” he explained.
The Fed’s Chair, Jerome Powell, indicated after its recent FOMC meeting that a significant portion of any escalation in inflation is likely attributable to tariffs, though a decline in economic growth might balance this out, albeit it could “delay” the Fed’s ability to reach its 2% inflation target.
Ernest further argues that making deficit reduction a priority for the administration contradicts the idea of issuing stimulus checks.
“Implementing a stimulus seems paradoxical given that we are already running deficits. Instead of applying savings to address the deficit, we would be returning it to consumers,” Ernest articulated.
The Treasury Department has assessed the national debt to be $36.22 trillion.
That being said, the concept may resurface, particularly if the economy begins to slow down beyond the administration’s comfort level, especially as mid-term elections approach.
Currently, the Fed maintains that external forecasts regarding recession risks do not factor into its assessments, and economic data remains relatively stable. However, concerns regarding recession potential are escalating as slower GDP growth is expected according to market predictions. Simultaneously, job reductions within the federal government and deportation plans contribute to uncertainties surrounding a national labor market that is currently stable, although hiring trends have slowed.
An ironic twist of a DOGE dividend, Ernest notes, is that governmental policies, such as job cuts at the federal level, might create sufficient economic instability to warrant stimulus payments.
“Traditionally, we consider these measures during an economic downturn when we seek to stimulate demand by putting more money into consumers’ hands to bolster the economy,” he remarked.
